Three Actual — and Actually Good — Plans to Replace Obamacare

Perhaps today will mark the beginning of a new phase in the long campaign for the GOP nomination for president in 2016. That’s possible because two of the leading candidates — Wisconsin governor Scott Walker and Florida senator Marco Rubio — have offered serious plans for replacing Obamacare in its entirety. (In Senator Rubio’s case, he reiterated in an op-ed the principles of a plan he outlined several months ago.) They, along with Louisiana governor Bobby Jindal, are now the candidates who can speak most credibly about what’s wrong with Obamacare, because they have actual plans to do something about it.

Governor Walker’s plan is very good because it is both workable as policy and realistic politically. It has five key features:

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&dash;Retention of Employer Coverage: Walker’s plan would leave in place today’s job-based insurance arrangements. There are 160 million Americans in those plans, and they generally like what they have. They do not want to have their health insurance upended based on an untested promise that they will get better coverage elsewhere under a new, reformed system. Walker is smart to signal to these Americans that his plan would basically leave them alone.

&dash;Tax Credits for Households without Access to Employer-Sponsored Insurance: Although most Americans today have access to employer coverage, a sizeable number of households do not have access to such plans, nor did they have access before Obamacare was enacted. Obamacare tried to close gaps in coverage by imposing a costly requirement on employers — the employer mandate — to offer insurance under more circumstances and in conformance with the government’s rules. It also extended expensive “premium credits” for people with lower incomes who purchased insurance in the heavily regulated Obamacare exchanges. Walker’s plan repeals the employer mandate and Obamacare’s premium credits and provides instead a much more flexible system of tax credits that households can use to purchase insurance plans of their choosing. The states, and not the federal government, would regulate these plans, and that means consumers are more likely to find plans that suit their actual needs. The credits would be age-adjusted but would not be reduced based on income, which means middle-class families would benefit from them, too.

&dash;Continuous Coverage Protection: Obamacare tried to take care of people with preexisting conditions by banning adjustments in premiums and coverage based on health status and then forcing everyone to buy government-approved insurance. Instead of coercion, Walker proposes a giant inducement: People who stay continuously insured will be protected from premium hikes or restrictions in coverage based on their health status. And there would be no reason for any American to not stay continuously covered, because they would either have access to an employer plan or receive a tax credit for insurance.

&dash;Expansion of Health Savings Accounts: Walker’s plan would give anyone who signs up for a Health Savings Account (HSA) a $1,000, one-time refundable tax credit and would increase the amount an individual can deposit into an HSA annually. Most taxpaying households without an HSA today would establish an account to get the tax credit, providing a significant boost to more consumer-directed health care.

&dash;Medicaid Reform: The plan would divide Medicaid into two programs, one serving the disabled and the elderly, and another providing subsidies for health insurance for able-bodied adults and their children with low incomes. The states would be given substantial new flexibility to run both parts of Medicaid, but the part devoted to the non-disabled and non-elderly would be converted into capped federal allotments to the states. States would have strong incentives to manage these fixed resources judiciously.

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Senator Rubio’s plan is similar to the Walker plan. That’s not surprising because both candidates want to replace Obamacare with a plan built on decentralized, market-driven reforms. The Rubio plan would also provide a refundable tax credit for health insurance and would shift regulatory authority from the federal government to the states.

But the Rubio plan differs from Walker’s approach in certain ways as well. It would gradually phase out (over ten years) the tax preference for employer-paid health-insurance premiums in favor of a universal tax credit that would be made available to all Americans, whether or not they have access to a job-based option. This approach is “fair” in the sense that it would ensure that all Americans were treated identically in terms of the tax treatment of health insurance. However, it is more vulnerable to political attack than the Walker approach because it would create some uncertainty about the continued viability of existing employer plans. For that reason, it seems likely that the Walker approach to tax credits would hold up better over time, especially when the inevitable attacks come from Obamacare’s defenders.

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The Rubio plan would also help people who have expensive preexisting conditions by giving them direct government subsidies instead of limiting what insurers can charge to people with continuous coverage. On this issue, too, Walker’s approach might be more attractive to voters because it does not depend on continued appropriations for high-risk pools, which have been chronically underfunded in the past.

To Rubio’s credit, his plan includes reform of the Medicare program for future program entrants, relying on the same principles of consumer choice and competition that inform the rest of his plan. Walker’s plan leaves aside Medicare for consideration in a separate proposal.

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#related#These differences are important but shouldn’t be overemphasized. Both plans are clearly informed by the same general perspective, which is that health care in the United States will be better, of higher quality, and less costly if decisions over the allocation of scarce resources are moved from the federal government to consumers, employers, and the states.

The early stage of the 2016 presidential race has been characterized by a relative absence of actual debate over policy proposals. That’s understandable, as actual voting is still months away and the campaigns are being pulled in a million directions at once.

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But one sure way for a candidate to make a good impression is by articulating a plan of action on an important matter and then defending that plan on the campaign trail. After all, that’s basically the job description of president.

For that reason alone, here’s hoping that what Walker, Rubio, and Jindal have done on health care will catch on and that, in the coming months, the candidates will compete vigorously over who has the best plan of action, on health care and other matters, for turning the country around.

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